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The Chicago-based pharmaceutical company that made headlines in 2016 for dramatically raising the prices of cheap skin creams has now filed for bankruptcy. The filing cites, in part, profit-scorching backlash from the price increases, the Chicago Tribune reports.

Further Reading

In September of 2016, Ars reported that the company, Novum Pharma, had repeatedly raised the price of an old, cheap skin cream, bringing its list price from $241.50 to $9,561 a tube—a 3,900 percent increase total. The cream, called Aloquin, is "possibly effective" for treating eczema and acne, according to the Food and Drug Administration. It's composed of a generic antibiotic and extracts from the aloe vera plant.

Novum raised Aloquin's price after acquiring the rights to it from Primus Pharmaceuticals in May of 2015. The company similarly raised the price of another skin cream, Alcortin A, to $7,142, the Financial Times reported at the time.

Those price hikes stemmed from Novum's trouble getting insurance companies to cover its creams, according to the Chapter 11 bankruptcy filing the company submitted to a court in Delaware February 2. Without insurance coverage, Novum's business was struggling, the filing explains. The price hikes were an attempt to correct the problem, but it backfired.

"These price increases, although necessary to support patient access commitments and ensure a minimum level of profitability for the business, led to public scrutiny regarding [Novum's] business model and further increased prescription rejection rates," Novum Chief Restructuring Officer Thomas O'Donoghue wrote in the filing.

The filing also said that manufacturing issues, a dispute with a wholesaler, and competition from generic creams contributed to the bankruptcy.

Further Reading

While the bankruptcy may seem like a victory in the battle to drag down soaring drug prices, Craig Garthwaite, director of healthcare at Kellogg School of Management at Northwestern University, did not have such an optimistic view. “I think we're seeing companies sensitive to announcing these price changes. I don't think we're seeing a wholesale change in behavior,” he told the Tribune.